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online business vat calculation

  • 11-08-2017 10:12pm
    #1
    Hippicrit
    Registered Users Posts: 7 ✭


    Hi
    I am setting up an online business. I have 2 questions. if anyone can help it would be very much appreciated.

    1)I would like to know how to calculate VAT on the following type of transaction.

    Example:
    Product retail value €18 + Shipping €12
    Customer purchase product , sending me €30.

    When calculating VAT of 23% to send the Revenue do I use the retail value of €18 (ie. €4.14) or the total including postage of €30 (€6.90).

    2) Is this the correct way to calculate the net profit on the same product as above.

    €30 (€18 product +shipping €12)

    €1.44 = 8% host site fee (fee applies to retail price only , 8% of €18)
    €1.00 = 3.35 % paypal fee (fee applies to retail +postage €30)
    €0.35 = per transaction paypal fee
    €12.00 = shipping cost
    €12.50 = cost of product
    €6.90 = VAT of 23% on €30

    Total Cost €34.19
    Net loss of €4.19


Comments

  • #2
    VonBeanie
    Registered Users, Registered Users 2 Posts: 101 ✭✭VonBeanie


    I would expect VAT to be charged on product and delivery. So €30 retail (incl delivery) would be €24.39 plus VAT of 23% (€5.61).

    Calculating gross profit uses the VAT exclusive revenue and costs.


  • #3
    Hippicrit
    Registered Users Posts: 7 ✭Hippicrit


    Hi
    Thanks for your reply.


  • #4
    Jonny303
    Registered Users, Registered Users 2 Posts: 634 ✭✭✭Jonny303


    Delivery through anpost is VAT at 0% but all other services take 23%


  • #5
    ellobee
    Registered Users, Registered Users 2 Posts: 366 ✭✭ellobee


    Hippicrit wrote: »
    Hi
    I am setting up an online business. I have 2 questions. if anyone can help it would be very much appreciated.

    1)I would like to know how to calculate VAT on the following type of transaction.

    Example:
    Product retail value €18 + Shipping €12
    Customer purchase product , sending me €30.

    When calculating VAT of 23% to send the Revenue do I use the retail value of €18 (ie. €4.14) or the total including postage of €30 (€6.90).

    2) Is this the correct way to calculate the net profit on the same product as above.

    €30 (€18 product +shipping €12)

    €1.44 = 8% host site fee (fee applies to retail price only , 8% of €18)
    €1.00 = 3.35 % paypal fee (fee applies to retail +postage €30)
    €0.35 = per transaction paypal fee
    €12.00 = shipping cost
    €12.50 = cost of product
    €6.90 = VAT of 23% on €30

    Total Cost €34.19
    Net loss of €4.19

    A number of things wrong with the above
    8% host site fee, are you sure the 8% is on retail price plus vat and not retail excl vat.
    3.35% paypal fee, thats ok
    €0.35 paypal transaction thats ok
    €12.00 shipping cost already includes vat, so cost excl vat is €9.76
    €12.50 cost of product, does this figure include vat?

    also whatever vat you paid on purchasing and supplying the product can be offset against the vat you owe revenue.

    Also your mark up is too low, if the product is costing €12.50 and you are selling for €14.63(18.00 incl vat) thats only a mark up of 17% and straight away you have costs of at least 11.5% with paypal and hosting site costs which leaves a margin of 5.5%


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